Archie Norman's Change Management at Asda

Introduction

Archie Norman's approach to "renewal" of the Asda stores was very much in alignment with that of any consultant group. Because Norman did not have direct experience with retail grocery stores, he needed to come up to speed quickly and approached his challenges as he would any consultant assignment. Whether this was prudent is perhaps a moot point—it was what Norman knew how to do. Further, Norman brought his colleagues from McKinsey & Company into the fray, basically setting up a frontline campaign as if he were in a war zone.

The Three Pillars of Renewal

Norman established three pillars as he assumed leadership of Asda: (1) an immediate fiscal and operational revamping; (2) a strategic plan for recovering market share; and (3) a comprehensive culture change. These changes happened against a background of communication issues best described as chimneys or silos. The departments of the organization more or less kept to themselves, failed to share critical information, and lacked any cohesive vision that would cause the corporate efforts to "pull together."

Communicating Problems and Strategy

One of Norman's early tactics was to shake the company out of its complacency and use a "tough love" approach to facing the realities of its fiscal situation. Communication at Asda was sufficiently fragmented that associates across the organization were not clear about the dire straits the company had created for itself. Norman tackled this head-on with the same sort of straight talk that he might have provided a client in his McKinsey & Company days in an effort to convince the client of the need for his services and justify the costs of the changes recommended.

Norman basically ignored any attempts to soft-pedal his discussion of the problems. They were exigencies, and Norman needed the associates at the company, the Board of Directors, and the stockholders to understand that the matter was urgent and deep. One of his goals was to buy time to fix the problem methodically and systematically, considering all the implications and developing a comprehensive plan—just as he would have done countless times for clients while employed as a consultant at McKinsey & Company.

It is understandable that Norman would consider the entire organization dysfunctional—he had no stake in the previous operations and he had a consultant's mentality, which basically dictates that you find every possible thing wrong with an organization, as that is the way to a comprehensive consulting engagement. However, this approach is not necessarily the avenue that change agents—in the softer organizational development use of the term—would employ. The stakeholders in the company do not go away like the CEO who was fired and the chief officers who were replaced. The stakeholders remain in place and they are ultimately responsible for effectively executing the change orders (Heracleous, 2001).

It is difficult to move stakeholders from a place where they have been informed that they are completely stupid and ruining the company to a place where they embrace the new culture being overlaid on their previously misguided orientation. One very astute move that Norman made—which made transparent his understanding of change processes—was the decision to empower associates in the organization. While Norman might have experienced deep resistance to change and resentment at being identified as part of the problem that the "boys" from McKinsey & Company were trying to fix, Norman smartly told the associates that they would experience a new level of control over their work and the corporation's success (Cadwell, 2005).

Although Norman bypassed the customary strategic planning processes designed to elicit buy-in from employees—no collectively developed vision, no collective assertion of value, no mission statement exhibiting the collective wisdom of the workers—he did convey that this was the best plan he could imagine at this time, and that he had secured the best help that he could afford and arrange to bring to the workers. Its successful implementation was in their hands, and this point was underscored by the ready-made Statement of Values that would become the aim star for the company. It is interesting, though predictable, that Norman did not feel he had sufficient expertise within the organization to rely on for the high-level strategic planning that commenced.

Operational Restructuring and Leadership Change

Norman was not a stranger to revamping operational change and he went about it with the enthusiasm and deep-cutting scalpel of a managing director in a private equity firm that has just infused a company with a huge corpus of investment fund dollars. There were going to be immediate changes and they were going to impact the bottom line. Replacing existing leadership is a common strategy, and private equity firms know that when well-placed, this can be very effective (Berry-Whelan, 2003).

The main consideration is that the new people understand that their energies must be directed toward profitability—this was precisely what was needed for the first pillar of the renewal strategy: an immediate fiscal and operational revamping. Norman replaced key personnel that he was confident would understand the game plan and not act as resistors to change in critical functional areas of the company. Fiscal steps included selling off non-food operations or shutting them down, reducing the headcount at the corporate headquarters by 30 percent, cutting by 10 percent in-store middle manager positions, and establishing an 18-month pay freeze for all employees that would prevent raises or bonuses (Mishra, et al, 2007).

For in-store employees, the loss of headcount at headquarters would be viewed as a favorable change, and the loss of some middle manager positions could be offset by granting new levels of autonomy and responsibility to store managers.

Cultural Transformation and Market Positioning

The primary focus of Norman and his officers over the next 18 months needed to be focused on the long-term efforts required for sustainable culture change. Naturally, if the operational and structural changes made by Norman resulted in an improved profit margin, then Asda associates would look on other required changes with more favor. The urgency of turning around Asda's fiscal situation would have been recognized at this point—six months into the renewal—and associates would be actively engaged in bringing about much of the needed changes.

A useful heuristic is to think of the change efforts at Asda as a U-shaped curve. There had to be immediate and steep changes made to operations and finances. This is the first pillar. As those steps accomplished increased stability for the company, the organization must gather momentum (the resting point of the curves) and then work diligently to change the culture. This is the third pillar: a comprehensive culture change. And it began with the first announcements by Norman, continued with the release and implementation of the Statement of Values, and continues as the in-store changes occur.

Asda underwent huge shifts in position, first during the declining years when it attempted to become an upscale grocery chain, then through corrections when it returned to its original focus—an everyday store for an everyday working person. This is the realm of the second pillar: a strategic plan for recovering market share. Going forward, Asda can contemplate any changes it might wish to make, do the requisite market research, and test changes in single stores at select locations. The company will also need to bring about the physical plant changes required by years of neglect.

It may be that the company continues in its present niche, or it may decide that it actually does want to capture some of the market share of more upscale grocery stores. Just as McDonald's competes with Starbucks through the careful installation and trenchant marketing of its coffee bar, Asda can incorporate some of Trader Joe's offerings. As Target has moved into groceries—effectively competing for market share with Fred Meyer—Asda can evaluate whether changes can be made effectively and determine the scope of change that the market will bear.

Conclusion

Norman's success as a change agent will depend largely on his ability to execute the requisite culture change at Asda. He made an excellent choice when he recruited Allen Leighton as VP of Marketing, who appears to be the sort of individual that associates will look to for confirmation that they are moving in the right direction. Norman's credibility will rest in the financial success of the company that results from the cost-cutting and structural changes he implemented early, and the backdrop of the softer attributes of the renewal effort.